Introduction to the Economy of China

Transcription

1 Introduction to the Economy of China Jessica Leight Williams Department of Economics February 3, 2016

2 Introduction China has experienced one of the most rapid transformations of any economy in the world over the last thirty years. Over the second half of the nineteenth century, China experienced a gradual decline both politically and economically, in the waning years of the Qing empire. This was followed by forty years of civil war, internecine violence and a Japanese invasion from 1911 to Under the Maoist era, some economic progress was made, but it was slow and came at considerable economic cost.

3 Introduction China has experienced one of the most rapid transformations of any economy in the world over the last thirty years. Over the second half of the nineteenth century, China experienced a gradual decline both politically and economically, in the waning years of the Qing empire. This was followed by forty years of civil war, internecine violence and a Japanese invasion from 1911 to Under the Maoist era, some economic progress was made, but it was slow and came at considerable economic cost.

4 Introduction China has experienced one of the most rapid transformations of any economy in the world over the last thirty years. Over the second half of the nineteenth century, China experienced a gradual decline both politically and economically, in the waning years of the Qing empire. This was followed by forty years of civil war, internecine violence and a Japanese invasion from 1911 to Under the Maoist era, some economic progress was made, but it was slow and came at considerable economic cost.

5 Introduction China has experienced one of the most rapid transformations of any economy in the world over the last thirty years. Over the second half of the nineteenth century, China experienced a gradual decline both politically and economically, in the waning years of the Qing empire. This was followed by forty years of civil war, internecine violence and a Japanese invasion from 1911 to Under the Maoist era, some economic progress was made, but it was slow and came at considerable economic cost.

6 China rising? Since the death of Mao in 1976, China has experienced a dramatic increase in GDP growth, productivity growth, and a rapid decline in poverty; the share of impoverished villages declined from 40.65% in 1980 to 10.55% in 1990 and 4.75% in GDP growth increased from approximately 4 percent annually prior to the reform to 9.5 percent during China is now the second largest economy in the world; its per capita GDP is now around 15% of U.S. per capita GDP at PPP levels, compared to less than 3% in the early 1950s. These are astonishing achievements, and this class will seek to understand the nature of this rapid economic transformation, and its implications for the welfare of Chinese citizens.

7 China rising? Since the death of Mao in 1976, China has experienced a dramatic increase in GDP growth, productivity growth, and a rapid decline in poverty; the share of impoverished villages declined from 40.65% in 1980 to 10.55% in 1990 and 4.75% in GDP growth increased from approximately 4 percent annually prior to the reform to 9.5 percent during China is now the second largest economy in the world; its per capita GDP is now around 15% of U.S. per capita GDP at PPP levels, compared to less than 3% in the early 1950s. These are astonishing achievements, and this class will seek to understand the nature of this rapid economic transformation, and its implications for the welfare of Chinese citizens.

8 China rising? Since the death of Mao in 1976, China has experienced a dramatic increase in GDP growth, productivity growth, and a rapid decline in poverty; the share of impoverished villages declined from 40.65% in 1980 to 10.55% in 1990 and 4.75% in GDP growth increased from approximately 4 percent annually prior to the reform to 9.5 percent during China is now the second largest economy in the world; its per capita GDP is now around 15% of U.S. per capita GDP at PPP levels, compared to less than 3% in the early 1950s. These are astonishing achievements, and this class will seek to understand the nature of this rapid economic transformation, and its implications for the welfare of Chinese citizens.

9 China rising? Since the death of Mao in 1976, China has experienced a dramatic increase in GDP growth, productivity growth, and a rapid decline in poverty; the share of impoverished villages declined from 40.65% in 1980 to 10.55% in 1990 and 4.75% in GDP growth increased from approximately 4 percent annually prior to the reform to 9.5 percent during China is now the second largest economy in the world; its per capita GDP is now around 15% of U.S. per capita GDP at PPP levels, compared to less than 3% in the early 1950s. These are astonishing achievements, and this class will seek to understand the nature of this rapid economic transformation, and its implications for the welfare of Chinese citizens.

10 Summary statistics

11 Prerequisites and requirements Prerequisites include Econ 110 and 255 (intermediate micro and econometrics), or equivalent. Exceptions require my written permission. Your grade will be based on quizzes, class participation, literature critiques, an oral presentation and a final paper.

12 Prerequisites and requirements Prerequisites include Econ 110 and 255 (intermediate micro and econometrics), or equivalent. Exceptions require my written permission. Your grade will be based on quizzes, class participation, literature critiques, an oral presentation and a final paper.

13 Prerequisites and requirements Prerequisites include Econ 110 and 255 (intermediate micro and econometrics), or equivalent. Exceptions require my written permission. Your grade will be based on quizzes, class participation, literature critiques, an oral presentation and a final paper.

14 Readings Readings for this course will primarily consist of economics papers, as well as some readings from a textbook. Your compliance with mandatory readings will be tested in quizzes. Each research paper s methodology will be reviewed in class, and you will have the opportunity to ask questions. You are expected to be generally familiar with the textbook readings; for the research papers, you must be familiar with the question of interest, literature review, data, and conclusions.

15 Readings Readings for this course will primarily consist of economics papers, as well as some readings from a textbook. Your compliance with mandatory readings will be tested in quizzes. Each research paper s methodology will be reviewed in class, and you will have the opportunity to ask questions. You are expected to be generally familiar with the textbook readings; for the research papers, you must be familiar with the question of interest, literature review, data, and conclusions.

16 Readings Readings for this course will primarily consist of economics papers, as well as some readings from a textbook. Your compliance with mandatory readings will be tested in quizzes. Each research paper s methodology will be reviewed in class, and you will have the opportunity to ask questions. You are expected to be generally familiar with the textbook readings; for the research papers, you must be familiar with the question of interest, literature review, data, and conclusions.

17 Readings Readings for this course will primarily consist of economics papers, as well as some readings from a textbook. Your compliance with mandatory readings will be tested in quizzes. Each research paper s methodology will be reviewed in class, and you will have the opportunity to ask questions. You are expected to be generally familiar with the textbook readings; for the research papers, you must be familiar with the question of interest, literature review, data, and conclusions.

18 Quizzes and literature critique There will be two quizzes over the semester; one at the midpoint, and one at the end of the semester. Each student will be required to write two five-page literature critiques of an academic paper from a list of papers provided; they will count for 30% combined. These can be submitted at any time in the semester (one in the first half, one in the second); each paper can be critiqued by only student. Details about paper selection in the syllabus.

19 Quizzes and literature critique There will be two quizzes over the semester; one at the midpoint, and one at the end of the semester. Each student will be required to write two five-page literature critiques of an academic paper from a list of papers provided; they will count for 30% combined. These can be submitted at any time in the semester (one in the first half, one in the second); each paper can be critiqued by only student. Details about paper selection in the syllabus.

20 Quizzes and literature critique There will be two quizzes over the semester; one at the midpoint, and one at the end of the semester. Each student will be required to write two five-page literature critiques of an academic paper from a list of papers provided; they will count for 30% combined. These can be submitted at any time in the semester (one in the first half, one in the second); each paper can be critiqued by only student. Details about paper selection in the syllabus.

21 Quizzes and literature critique There will be two quizzes over the semester; one at the midpoint, and one at the end of the semester. Each student will be required to write two five-page literature critiques of an academic paper from a list of papers provided; they will count for 30% combined. These can be submitted at any time in the semester (one in the first half, one in the second); each paper can be critiqued by only student. Details about paper selection in the syllabus.

22 Class participation Class participation is 15% of your final grade; this is not automatic credit. Regular attendance and well-informed contributions to the discussion are essential. If at any point you have questions about your participation grade, you can consult me; I will also provide midterm warnings to students who are at risk of low participation credit.

23 Class participation Class participation is 15% of your final grade; this is not automatic credit. Regular attendance and well-informed contributions to the discussion are essential. If at any point you have questions about your participation grade, you can consult me; I will also provide midterm warnings to students who are at risk of low participation credit.

24 Class participation Class participation is 15% of your final grade; this is not automatic credit. Regular attendance and well-informed contributions to the discussion are essential. If at any point you have questions about your participation grade, you can consult me; I will also provide midterm warnings to students who are at risk of low participation credit.

25 Presentations and final paper Each student is required to write a final paper, pages (both minimum and maximum are binding!). I will provide a list of suggested topics. Within those topics, each student must define a specific question of interest, summarized in a two-page proposal accompanied by an annotated bibliography.

26 Presentations and final paper Each student is required to write a final paper, pages (both minimum and maximum are binding!). I will provide a list of suggested topics. Within those topics, each student must define a specific question of interest, summarized in a two-page proposal accompanied by an annotated bibliography.

27 Presentations and final paper Each student is required to write a final paper, pages (both minimum and maximum are binding!). I will provide a list of suggested topics. Within those topics, each student must define a specific question of interest, summarized in a two-page proposal accompanied by an annotated bibliography.

28 Final paper topics For example: how has educational policy evolved over the course of the reform period, and what impact has it had on student welfare? What are the objectives of China s grain policy, and how have those objectives changed over time? What impact has Chinese industrial development had on the environment? The question of interest should be answered demonstrating mastery of the literature as well as any relevant data; original data analysis is encouraged, though this can be data at any level and does not necessarily require regressions. Students that do not pursue any original analysis will in general find it harder to receive top grades on the paper.

29 Final paper topics For example: how has educational policy evolved over the course of the reform period, and what impact has it had on student welfare? What are the objectives of China s grain policy, and how have those objectives changed over time? What impact has Chinese industrial development had on the environment? The question of interest should be answered demonstrating mastery of the literature as well as any relevant data; original data analysis is encouraged, though this can be data at any level and does not necessarily require regressions. Students that do not pursue any original analysis will in general find it harder to receive top grades on the paper.

30 Final paper topics For example: how has educational policy evolved over the course of the reform period, and what impact has it had on student welfare? What are the objectives of China s grain policy, and how have those objectives changed over time? What impact has Chinese industrial development had on the environment? The question of interest should be answered demonstrating mastery of the literature as well as any relevant data; original data analysis is encouraged, though this can be data at any level and does not necessarily require regressions. Students that do not pursue any original analysis will in general find it harder to receive top grades on the paper.

31 Presentations In addition, every student is required to present his/her research to the class in an oral presentation, including slides. The presentations will be done in the last 5-6 class sessions; exact scheduling will be confirmed later. Students will be graded on the quality of their oral communication and their ability to effectively summarize the results of their research. The presentation will count for 10%; the paper for 25%, and the proposal for 5%.

32 Presentations In addition, every student is required to present his/her research to the class in an oral presentation, including slides. The presentations will be done in the last 5-6 class sessions; exact scheduling will be confirmed later. Students will be graded on the quality of their oral communication and their ability to effectively summarize the results of their research. The presentation will count for 10%; the paper for 25%, and the proposal for 5%.

33 Presentations In addition, every student is required to present his/her research to the class in an oral presentation, including slides. The presentations will be done in the last 5-6 class sessions; exact scheduling will be confirmed later. Students will be graded on the quality of their oral communication and their ability to effectively summarize the results of their research. The presentation will count for 10%; the paper for 25%, and the proposal for 5%.

34 Presentations In addition, every student is required to present his/her research to the class in an oral presentation, including slides. The presentations will be done in the last 5-6 class sessions; exact scheduling will be confirmed later. Students will be graded on the quality of their oral communication and their ability to effectively summarize the results of their research. The presentation will count for 10%; the paper for 25%, and the proposal for 5%.

35 Class format and goals The objective of this class is both to familiarize you with the overall arc of economic reform in China, and to make you an informed consumer of economic research on China. Accordingly, the readings will be balanced between textbook readings that provide background and academic papers. Similarly, class sessions will be balanced between lecture material that will review general historical background on economic policy, and active discussion of the research papers. The balance will be adjusted during the course of the semester as required.

36 Class format and goals The objective of this class is both to familiarize you with the overall arc of economic reform in China, and to make you an informed consumer of economic research on China. Accordingly, the readings will be balanced between textbook readings that provide background and academic papers. Similarly, class sessions will be balanced between lecture material that will review general historical background on economic policy, and active discussion of the research papers. The balance will be adjusted during the course of the semester as required.

37 Class format and goals The objective of this class is both to familiarize you with the overall arc of economic reform in China, and to make you an informed consumer of economic research on China. Accordingly, the readings will be balanced between textbook readings that provide background and academic papers. Similarly, class sessions will be balanced between lecture material that will review general historical background on economic policy, and active discussion of the research papers. The balance will be adjusted during the course of the semester as required.

38 Class format and goals The objective of this class is both to familiarize you with the overall arc of economic reform in China, and to make you an informed consumer of economic research on China. Accordingly, the readings will be balanced between textbook readings that provide background and academic papers. Similarly, class sessions will be balanced between lecture material that will review general historical background on economic policy, and active discussion of the research papers. The balance will be adjusted during the course of the semester as required.

39 Rapid growth of per capita GDP Per capita GDP in China increased rapidly after The acceleration of per capita GDP growth was particularly rapid after After huge fluctuations in growth around zero before 1980, subsequently growth has been persistently high.

40 Rapid growth of per capita GDP Per capita GDP in China increased rapidly after The acceleration of per capita GDP growth was particularly rapid after After huge fluctuations in growth around zero before 1980, subsequently growth has been persistently high.

41 Rapid growth of per capita GDP Per capita GDP in China increased rapidly after The acceleration of per capita GDP growth was particularly rapid after After huge fluctuations in growth around zero before 1980, subsequently growth has been persistently high.

42 Social indicators GDP growth has been matched by comparably rapid transformation in social indicators. There has been a huge increase in mobile phone subscribers. At the same time, there has been a rapid increase in Internet subscribers as China vaults into the digital age.

43 Social indicators GDP growth has been matched by comparably rapid transformation in social indicators. There has been a huge increase in mobile phone subscribers. At the same time, there has been a rapid increase in Internet subscribers as China vaults into the digital age.

44 Social indicators GDP growth has been matched by comparably rapid transformation in social indicators. There has been a huge increase in mobile phone subscribers. At the same time, there has been a rapid increase in Internet subscribers as China vaults into the digital age.

45 Health indicators There has been a rapid decline in infant mortality. Life expectancy has increased from mid-40s to over 70. The fertility rate has also plummeted.

46 Health indicators There has been a rapid decline in infant mortality. Life expectancy has increased from mid-40s to over 70. The fertility rate has also plummeted.

47 Health indicators There has been a rapid decline in infant mortality. Life expectancy has increased from mid-40s to over 70. The fertility rate has also plummeted.

48 Historical perspective, Part I

49 Historical perspective, Part II

50 China in the world economy, Part I

51 China in the world economy, Part II

52 China in the first half of the twentieth century China began to develop modern industrial, transportation, banking and finance sectors in the early 20th century, but their growth was stymied by persistent civil war and the Japanese invasion. Following the CCP takeover in 1949, the regime created an economic system largely modeled after the USSR: there were annual and five-year plans, extensive state ownership, central control of prices, and material balance plans that allocated inputs, products and financing. The primary objective was to raise domestic saving and extract resources from the rural sector, channeling those resources toward industrial growth. The CCP also forced rural collectivization on a large scale - even larger than the USSR.

53 China in the first half of the twentieth century China began to develop modern industrial, transportation, banking and finance sectors in the early 20th century, but their growth was stymied by persistent civil war and the Japanese invasion. Following the CCP takeover in 1949, the regime created an economic system largely modeled after the USSR: there were annual and five-year plans, extensive state ownership, central control of prices, and material balance plans that allocated inputs, products and financing. The primary objective was to raise domestic saving and extract resources from the rural sector, channeling those resources toward industrial growth. The CCP also forced rural collectivization on a large scale - even larger than the USSR.

54 China in the first half of the twentieth century China began to develop modern industrial, transportation, banking and finance sectors in the early 20th century, but their growth was stymied by persistent civil war and the Japanese invasion. Following the CCP takeover in 1949, the regime created an economic system largely modeled after the USSR: there were annual and five-year plans, extensive state ownership, central control of prices, and material balance plans that allocated inputs, products and financing. The primary objective was to raise domestic saving and extract resources from the rural sector, channeling those resources toward industrial growth. The CCP also forced rural collectivization on a large scale - even larger than the USSR.

55 China in the first half of the twentieth century China began to develop modern industrial, transportation, banking and finance sectors in the early 20th century, but their growth was stymied by persistent civil war and the Japanese invasion. Following the CCP takeover in 1949, the regime created an economic system largely modeled after the USSR: there were annual and five-year plans, extensive state ownership, central control of prices, and material balance plans that allocated inputs, products and financing. The primary objective was to raise domestic saving and extract resources from the rural sector, channeling those resources toward industrial growth. The CCP also forced rural collectivization on a large scale - even larger than the USSR.

56 The central planning era: achievements World Bank estimates that China s planned economy generated annual average growth of around 4.2 percent in per capita GNP; this figure was exceeded by only 10/77 nonindustrialized nations. Life expectancy increased from 44.2 in 1950 to 66.4 in 1982 for males. The proportion of Chinese aged who did not complete primary school declined from 74 to 40 percent between 1952 and 1978.

57 The central planning era: achievements World Bank estimates that China s planned economy generated annual average growth of around 4.2 percent in per capita GNP; this figure was exceeded by only 10/77 nonindustrialized nations. Life expectancy increased from 44.2 in 1950 to 66.4 in 1982 for males. The proportion of Chinese aged who did not complete primary school declined from 74 to 40 percent between 1952 and 1978.

58 The central planning era: achievements World Bank estimates that China s planned economy generated annual average growth of around 4.2 percent in per capita GNP; this figure was exceeded by only 10/77 nonindustrialized nations. Life expectancy increased from 44.2 in 1950 to 66.4 in 1982 for males. The proportion of Chinese aged who did not complete primary school declined from 74 to 40 percent between 1952 and 1978.

59 The central planning era: weaknesses Food scarcity in rural areas was persistent, and a man-made famine from during the Great Leap Forward (massive rural industrialization drive, characterized by relentless over-procurement of grain from rural areas) killed million Chinese. Industry was characterized by many inefficiencies: emphasis on quantity rather than quality, a focus on investment goods, neglect of innovation, isolation from the international economy. There was a chronic neglect of services. Evidence suggests productivity (output per unit of capital and education-enhanced labor) did not increase at all over this period.

60 The central planning era: weaknesses Food scarcity in rural areas was persistent, and a man-made famine from during the Great Leap Forward (massive rural industrialization drive, characterized by relentless over-procurement of grain from rural areas) killed million Chinese. Industry was characterized by many inefficiencies: emphasis on quantity rather than quality, a focus on investment goods, neglect of innovation, isolation from the international economy. There was a chronic neglect of services. Evidence suggests productivity (output per unit of capital and education-enhanced labor) did not increase at all over this period.

61 The central planning era: weaknesses Food scarcity in rural areas was persistent, and a man-made famine from during the Great Leap Forward (massive rural industrialization drive, characterized by relentless over-procurement of grain from rural areas) killed million Chinese. Industry was characterized by many inefficiencies: emphasis on quantity rather than quality, a focus on investment goods, neglect of innovation, isolation from the international economy. There was a chronic neglect of services. Evidence suggests productivity (output per unit of capital and education-enhanced labor) did not increase at all over this period.

62 The central planning era: weaknesses Food scarcity in rural areas was persistent, and a man-made famine from during the Great Leap Forward (massive rural industrialization drive, characterized by relentless over-procurement of grain from rural areas) killed million Chinese. Industry was characterized by many inefficiencies: emphasis on quantity rather than quality, a focus on investment goods, neglect of innovation, isolation from the international economy. There was a chronic neglect of services. Evidence suggests productivity (output per unit of capital and education-enhanced labor) did not increase at all over this period.

63 Tipping point for reform Mao Zedong died in 1976 at the age of 83; this was inevitably a major political turning point for the PRC. There was wide agreement among the elite for the need for change, without any sense of reform direction; this was motivated particularly by rapid growth in surrounding East Asian economies. More specifically, as the Cultural Revolution concluded, there were rising reports of reduction in grain stocks, local shortages, and calls for decline in grain procurement - reminiscent of the Great Leap Forward. With the fear of rural famine lurking, reform began in agriculture.

64 Tipping point for reform Mao Zedong died in 1976 at the age of 83; this was inevitably a major political turning point for the PRC. There was wide agreement among the elite for the need for change, without any sense of reform direction; this was motivated particularly by rapid growth in surrounding East Asian economies. More specifically, as the Cultural Revolution concluded, there were rising reports of reduction in grain stocks, local shortages, and calls for decline in grain procurement - reminiscent of the Great Leap Forward. With the fear of rural famine lurking, reform began in agriculture.

65 Tipping point for reform Mao Zedong died in 1976 at the age of 83; this was inevitably a major political turning point for the PRC. There was wide agreement among the elite for the need for change, without any sense of reform direction; this was motivated particularly by rapid growth in surrounding East Asian economies. More specifically, as the Cultural Revolution concluded, there were rising reports of reduction in grain stocks, local shortages, and calls for decline in grain procurement - reminiscent of the Great Leap Forward. With the fear of rural famine lurking, reform began in agriculture.

66 Tipping point for reform Mao Zedong died in 1976 at the age of 83; this was inevitably a major political turning point for the PRC. There was wide agreement among the elite for the need for change, without any sense of reform direction; this was motivated particularly by rapid growth in surrounding East Asian economies. More specifically, as the Cultural Revolution concluded, there were rising reports of reduction in grain stocks, local shortages, and calls for decline in grain procurement - reminiscent of the Great Leap Forward. With the fear of rural famine lurking, reform began in agriculture.

67 Chinese reform period In the third lecture, we ll start by analyzing the course of economic reform and recent evolution of economic policy in China. In the next lecture, we will detour to review some basics of linear regression that will be helpful in understanding the literature to be analyzed in this class. There will also be periodic reviews of more advanced econometric techniques that are relevant.

68 Chinese reform period In the third lecture, we ll start by analyzing the course of economic reform and recent evolution of economic policy in China. In the next lecture, we will detour to review some basics of linear regression that will be helpful in understanding the literature to be analyzed in this class. There will also be periodic reviews of more advanced econometric techniques that are relevant.

69 Chinese reform period In the third lecture, we ll start by analyzing the course of economic reform and recent evolution of economic policy in China. In the next lecture, we will detour to review some basics of linear regression that will be helpful in understanding the literature to be analyzed in this class. There will also be periodic reviews of more advanced econometric techniques that are relevant.